The Japan Times - Microsoft valuation surges above $4 trillion as AI lifts stocks

The landmark valuation is the latest sign of growing bullishness about an AI investment boom that market watchers believe is still in the early stages -- even as companies like Microsoft plan $100 billion or more in annual capital spending to add new capacity.

Microsoft reported profit of $27.2 billion on revenue of $76.4 billion in its fiscal fourth quarter, capping another year of growth amid massive customer interest in the company's cutting-edge AI capacity.

Shortly after midday, Microsoft shares were up 4.3 percent, giving it a market capitalization slightly under $4 trillion after earlier eclipsing the benchmark.

"Cloud and AI is the driving force of business transformation across every industry and sector," said Microsoft CEO Satya Nadella. "We're innovating across the tech stack to help customers adapt and grow in this new era."

The results drew plaudits from Wall Street analysts on an earnings conference call at which Nadella boasted that the company had opened new data centers across six continents in the last year and touted major contracts for global companies like Nestle and Barclays.

Microsoft was one of the first tech giants to double down on artificial intelligence when the launch of ChatGPT in 2022 rocked the tech industry. Microsoft has had a strategic partnership with ChatGPT maker OpenAI since 2019, holding rights to its intellectual property.

At the heart of the results was a stunning 39 percent surge in Azure, the company's legacy cloud computing platform, which is getting "supercharged" with AI, said Angelo Zino, technology analyst at CFRA Research.

Zino attributed "just about all of" Microsoft's recent surge in valuation to AI.

- Legacy businesses -

While Nvidia is part of a wave of tech companies that have risen to prominence with the AI boom of the last few years, Microsoft has long been among America's corporate elite, joining the prestigious Dow index in 1999, more than a decade after introducing the once-revolutionary Windows program.

The company's revenue base includes such workplace mainstays as the Outlook email platform and the LinkedIn career website. Microsoft also has a significant gaming division with the Xbox console.

All of these businesses are set to benefit from Microsoft's AI advantages.

"We view (Microsoft) as kind of the enterprise king," said Zino. "What AI does is it provides new growth opportunities for this company."

For all of fiscal 2025, Microsoft reported revenues of $281.7 billion, up 15 percent from the prior year. Microsoft's revenues have more than doubled from 2018, when they were $110.4 billion.

Zino thinks Microsoft is poised for a comparable run over the next six or seven years when it could see annual revenue growth of 10 percent as greater use of AI creates even more opportunity.

The biggest risk to this outlook -- and to the AI boom generally -- would be "if we get to the point where supply for AI exceeds demand," Zino said. "That could put pressure on pricing for cloud computing and space."

T.Ikeda--JT